Investors And Banks Row Over Share Lock-Ups

By Mark Kleinman, City Editor

Some of the City's most powerful investors are at loggerheads with leading investment banks over the apparent flouting of guidelines which restrict the sale of large company shareholdings within a specified period.

Sky News understands that the Association of British Insurers (ABI), which represents many of the big institutional investors in London's stock markets, is in talks with the City watchdog about the terms of so-called lock-up periods which govern shareholders' ability to sell tranches of shares.

The ABI believes that the existing guidelines are not working effectively and is calling for 'hard lock-ups' for a period of six months from an event such as a flotation or a prior share sale. These would automatically prevent the disposal of any shares by investors subject to the restriction, although they would gain more flexibility to sell following the end of that six-month period.

The demand was triggered by Lloyds Banking Group's sale of two large chunks of shares in St James's Place, the wealth management group, earlier this year.

The initial deal, which saw Lloyds offload roughly 20% of St James's Place in March, was accompanied by a pledge from the taxpayer-backed bank not to sell any more shares for at least a year.

Such commitments reassure other investors that large numbers of shares are not about to be dumped onto the market, a move which can exert downward pressure on a company's share price.

Just two months later, however, Lloyds sold a further £450m-worth of St James's Place shares after its broker, Bank of America Merrill Lynch, waived the previously-agreed lock-up arrangement.

The move attracted little attention at the time, but infuriated a number of leading City shareholders, who encouraged the ABI to push for a formal agreement with investment banks over the matter.

"The issue is getting unanimity on what the agreed terms should be," said a person close to the talks.

The ABI declined to comment.

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